The $1.25 billion home-buyer incentive program included in the federal budget took affect September 2, 2019. It will be administered by CMHC.
The cost of homes continues to increase and the new program may benefit as many as 100,000.00 Canadian families.
The program works in the form of shared equity between the homeowner and the government via mortgage providers CanadaGuaranty, CMHC or Genworth.
It offers 5% for buying an existing home and up to 10% toward a newly constructed one. The buyer repays after 25 years or when the property is sold, whichever is earlier.
First-time buyers with household incomes of less than $120,000 a year could save up to $228 per month on a $500,000 house without increasing their down payments. Homebuyers must have a minimum 5% down payment (insured mortgage). The maximum mortgage value plus CMHC loan is capped at $480,000.
For example, on a $400,000 resale after deducting a 5% down payment ($20,000.00) and 5% incentive ($20,000) your mortgage amount is reduced to $360,000 saving $120 per month (based on a 3.49 mortgage rate) or by purchasing a new home with 10% incentive the mortgage amount is reduced to $340,000 potentially saving $228 per month.
The monthly savings would depend on amortization, interest rates and mortgage terms.
This program is coupled with an increase of the RRSP Home Buyer’s Plan from $25,000 to $35,000 allowing couples to withdraw up to $70,000 tax free. Richmond Hill MP Majid Jowhari said the incentive program frees up cash for middle class Canadians that can be spent on healthy food, sports activities for children or saving for the future.
Article Adapted from Colin McClelland of The Financial Post
Full Article Here: https://bit.ly/2lQWyfL
Text...
